How Inflation Will Impact The 2020s & 2030s

Recently, people have been asking me a lot about what the next 10–20 years will look like.

How inflation will impact the economy and what this means for them personally.

This article describes the general outlook I have for the next one to two decades. I will explain how — in my opinion — inflation and potential deflationary crashes will shape the future and how I as an investor will prepare for this.

Buckle up, it’s gone be a wild ride.

Disclaimer: Please note that the following is a summary of what I believe has a high chance of happening. However, I DO NOT claim that things will exactly play out like this. And as always, this article is intended to educate people. It should not be taken as financial advice.

Going From A Non-Inflationary To An Inflationary World

We are facing difficult times.

After decades of living in a non-inflationary environment (not for all goods and assets, but in general) supported by lots of cheap high-density energy and a globalized economy, we are now facing strong price increases in all areas.

To understand the background of why that is happening, I recommend you to check out this article I wrote. It offers a detailed explanation about why inflation is suddenly picking up, and how this impacts my investment decisions in the short to medium term.

Here is a very short summary: We are running out of cheap high-density energy (fossil fuels) to run everything and grow our economies. Governments try to substitute missing energy by pumping money into the system. But this does not bring back growth and is also contributing to rising prices.

Hooked On Cheap Money

I think inflation will continue to shape the coming decades.

To stop the current inflationary process, central banks would have to take governments and corporations off the cheap money supply by raising interest rates. But I doubt that this will happen soon. The system relies on more liquidity to prevent a crash. Raising interest rates would cause a lot of inefficient and indebted governments and corporations to go bankrupt. They would also drag down a lot of healthy businesses with them.

This would most likely break the global financial system and cause a serious global recession.

The consequence: People (voters) around the world would face severe hardships. This is something most governments can’t survive. So they will likely keep pouring more money into the system.

However, a crash still could happen. In fact, I see a high chance that it will at some point because the whole system is so inefficient, over-complex, and over-leveraged that it will break eventually. We have countless examples of this happening in human history. And governments will not be able to control it.

*Update March 2022: As it turns out, the Ukraine war and it consequences will very likely trigger the next recession.

But even when a deflationary crash happens, the underlying reasons for inflation will not go away.

Because the lack of high-density energy will not be easily solved (if at all). Without enough high-density energy available, the economy can’t grow its way out of the current crisis. And even if we would be able to solve our energy problems by massively building up our capacities for renewable energy, it would take us decades to make the transition.

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